The real estate sector, which is struggling due to the combined effects of diving demand, huge debt and piling inventory on their balance sheets, is hoping for a reprieve from Reserve Bank of India’s decision on Tuesday to reduce the Statutory Liquidity Ratio.
The move is expected to bring in an additional Rs. 63,000 crore liquidity into the system, and some banks may opt to pass on the benefits to new home loans, marginally improving the situation for realty players.
RBI cut the SLR by one percentage point from 24% to 23%.
“There would be transfer of resources from the SLR to the real estate sector whether private or public... this credit would largely go to retail,” said Pratip Chaudhuri, chairman, State Bank of India.
“Some banks especially the smaller ones could use this (slash in SLR) as an opportunity to expand their housing loan portfolio and pass on the benefits to new customers for home loans,” a senior banker told Hindustan Times on Tuesday.
Cheaper loans, even if only for new customers, could bring some respite for the real estate sector. According to Cushman & Wakefield, new projects — an indicator of the health of real estate sector — were down by 44% in July-September, 2011-12.
Some analysts are still skeptical whether a spurt in new loans alone will help realtors. “This weaker sales picture is unlikely to change until the economy gains renewed traction,” said Simon Rubinsohn, chief economist, RICS.
“City property prices may not fall as developers continue to hold on to prices across sub-markets,” said Ramesh Nair, MD, west, Jones Lang LaSalle India.